Sterling sentiment hasn't changed over the last few weeks. Problems still abound with UK inflation high and the UK economy slowing. The housing market is still suffering and as the credit crunch continues to bite, mortgage approvals have fallen significantly, we are far from seeing an end to the uncertainty. The Bank of England meets this week and the expectation that given the current diverse position noted above they will sit on their hands and keep UK interest rates unchanged. Do they have any other option? Probably not and I expect steady as she goes for a while.
The US$ sits at US$1.995/£1 inter bank having lost ground on the back of the Fed meeting last week in which they kept US$ interest rates on hold. This wasn't a surprise but it was the lack of insight as to future direction on interest rates in the accompanying statement that left the market wondering and worrying. Rhetoric from senior US officials over the last few weeks had supported a strengthening US$ but given the lack of support from the Fed statement the market took this support to be somewhat hollow. Hence the fall in the US$.
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